Finance (No. 4) Bill

Lord Jackson of Peterborough Excerpts

Monday 16th April 2012 Commons Chamber

[Nia Griffith]

I certainly applaud measures to give young people the opportunity to take out loans to start up businesses, but even people with immense experience are finding it incredibly difficult to do that. There is just not the right climate at the moment to start a business. I would like to see more stimulus for the economy so that people who want to establish start-ups have a viable chance of making a success of them. At the moment, it is terribly difficult for anybody to sell anything to anyone or to persuade anyone to part with their money, which is the essence of getting a business going.

In Wales, we are trying to create jobs for young people; we are also investing money in infrastructure projects, again within the limitations of the Welsh budget. The Welsh Minister for Business, Enterprise, Technology and Science is providing grants and loans to companies to help them to expand and get their businesses going, because we are having so much difficulty with the banks. For example, in my constituency, Tallent Automotive has received money to keep workers in work, which people are very pleased about, and EBS Automation, a very enterprising engineering firm, has received money to expand, which means new jobs for young people in a high-skilled field. Those are the sorts of programme that I would like to see from the UK Government. What the Welsh Government can do affects only a small part of the economy in Wales. I would like to see the same kind of stimulus across the UK. First and foremost, my concern is about the lack of a coherent growth strategy.

Consumer confidence remains low. Many people fear that they may lose their job or have their hours cut. People have been hit hard by rising prices, which have been compounded by the VAT rise. Obviously, people on low and modest incomes have little spare income to put by, so their money goes straight back into the local economy. That contrasts with the money given away to millionaires at the top, who do not have to do anything with it immediately and do not know what they will do with it. They know that there is no benefit to them from putting it back into the local economy.

[Mr Stewart Jackson (Peterborough) (Con)]

What does the hon. Lady say to the 810,000 people in the eastern region who are better off because their tax allowance has been altered? Those are low-paid working people who have had a stimulus and are spending the money locally as a result of the measures in the Budget.

[Nia Griffith]

If the hon. Gentleman had been listening earlier, he would have heard me explain that those people have already lost that money through the VAT increase. That is a stealth tax and a regressive tax, which always affects the least well-off the most. Many of the people who will get a little more in their pay packet because they will pay a little less tax when the personal allowance goes up will find that because of other taxes that have been implemented, they have lost that money already. Sadly, those people will not do so well.

The personal allowance helps people nearly all the way up the income scale, particularly those in two-income families. Frankly, although it is an expensive measure, it is not a well targeted one. As I mentioned, I would have liked to keep the tax credits system, which helped those who really needed it and took account of people’s different circumstances because it was based on the household income.

There is nothing to incentivise people to put their money back into the local economy and nothing to encourage people to unlock their savings and help the economy. We had the car scrappage scheme, so that people who were planning to buy a car that would last them for the next 10 or 12 years would bring the purchase forward by a year or two to take part in the scheme. We did the same thing with the replacement of boilers. Those schemes were introduced specifically to get the economy going. What have this Government done? They have thrown out of the window the one such scheme that they did have, which was the solar panels scheme, under which people were unlocking £10,000, £15,000 or £20,000 of their savings and spending it immediately in the local economy. Even if the panels were not made locally, all the fitting work to install the solar panels was done by skilled plumbers and craftsmen, so the money went directly into the local economy.

The Government completely messed that scheme up and destroyed the industry’s confidence by incompetently changing the rules before the consultation was finished. They did not scale the scheme down in a sensible way, as the industry had asked. People in the industry accepted that the tariff would change over time, but they could not stomach being treated like idiots. The Government just said, “We’re going to change all this,” even though people had invested a lot of money. Some people had spent £3,000 on a course learning how to convert from being an ordinary central heating plumber to a solar panel installer. Some firms had expanded for the purpose, and firms in my constituency are laying people off because of the ridiculous changes.

What other scheme do the Government have in mind to get people to unlock their savings for an excellent investment that is environmentally friendly and provides local jobs? We have not seen such a scheme in the Budget. We have made some suggestions, but it seems that the Chancellor has ignored them. For example, we suggested a cut in VAT on repairs and improvements to houses. With the construction industry on its knees, that would have enabled plumbers, carpenters, electricians, plasterers and so on to find extra work, and people would have been encouraged to take on home improvements. What did the Chancellor do? The exact reverse. He slapped additional VAT on alterations to listed buildings.

--- Later in debate ---

[Nia Griffith]

I can certainly tell the hon. Gentleman that over the whole country, 4.4 million pensioners who earn between £10,000 and £29,000 will be affected, including a huge number in my constituency.

People are incensed—not just pensioners but their friends and relatives. They say, “This is how it’s been since the 1920s, and the change came from nowhere.” Older people like to plan; they tend to be careful and like to know what will happen. In a Budget that was leaked and leaked, this change was just pulled out of a hat like some dreadful spotted rabbit. People were appalled, given all the emphasis that had been put on other measures that might be in the Budget.

Pensioners have to face that on top of losing their winter fuel allowance, which was a universal benefit and very useful for all manner of pensioners. We are talking about pensioners who have put by a little money and made some provision for their old age. They feel aggrieved because they have tried to do the right thing. They have been hit by the VAT rises. They have been lucky that it has been a mild winter this year, but they all tell me, “Look at my electricity and gas bills.” What are the Government doing to control energy prices? Absolutely nothing. Prices have gone through the roof even though the weather has been milder than last year, and pensioners are struggling to pay those bills. Then there is the fiasco at the petrol pumps. People had already been hit by mid-March with very high petrol and diesel prices, when suddenly the Government inflamed the situation by telling everyone to rush out and panic buy. Of course, everyone now faces even higher, inflated prices at the petrol pump.

Pensioners have been hit time and again. For those on a fixed income when interest rates are low, the rampant inflation that we have experienced is particularly hurtful. Again, pensioners have been badly affected. All in all, there is a feeling that the Budget takes from the wrong people. It takes from people who spend their money locally, tend to be careful with their money, and have saved. They spend a certain amount on their grandchildren, but they will have less money to do that—all to fund the cut in the 50p tax rate for those who earn more than £150,000. For some people who earn millions, it will mean that they are not just hundreds but thousands and tens of thousands of pounds better off. That is extremely unfair.

The people I meet ask why that is happening and why we are not all in it together. They ask why the 50p rate is not kept so that there is a fairer distribution of taxes across society.

[Mr Stewart Jackson]

I must remind the hon. Lady about the deficit. The previous Labour Government ran a structural and a cyclical deficit before the financial crisis. Between 2000 and 2010, they increased public expenditure in real terms by 53%, yet managed to double youth unemployment. The hon. Lady extols the virtue of Keynesian economics and growth management, but we have to deal with the deficit, and that is why we must make such difficult decisions.

[Nia Griffith]

The hon. Gentleman knows perfectly well that, until 2008, we were reducing the national debt. Obviously, when a world crisis occurs, a stimulus must be provided. By the time we left government in 2010, the economy was beginning to pick up. It has flatlined since. We gave the Government the opportunity on a plate to try to get things going, but they squandered it and have put us back behind the starting posts. We are now in a truly difficult situation because getting things going again will be much harder.

The Budget has the wrong priorities. We do not seem to be getting the economy going and we are not putting money where it needs to go. Instead, we seem to be giving it away frivolously and stupidly. The money that is used for tax cuts for the wealthy should be put into stimulating the economy so that everybody can have a share of the wealth.